US Dollar Monthly Exchange Rates Forecast - July 2025

The US dollar remains under pressure as economic data softens, jobless claims rise, and markets increasingly price in a Fed rate cut by September. Political risk, particularly from Trump-era tariff threats and uncertainty over Fed leadership, continues to weigh on sentiment. With the dollar posting its worst first-half performance on record, much of the pessimism appears priced in. Still, July could bring volatility, and any upside surprise in jobs or inflation data, or easing in trade tensions, may trigger a short-lived rebound. For July, expect a choppy path, with scope for a short-covering rally if US data and global trade signals turn less negative.

The Canadian dollar has trended higher alongside broad USD weakness and maintains a tight correlation with the Dollar Index. However, CAD gains remain uneven, with strong resistance around 1.38 and a technical target near 1.34. The Bank of Canada’s early rate cuts limit the scope for additional easing, contrasting with more aggressive Fed expectations. That divergence supports CAD, but falling oil prices and weakening domestic data could limit gains. For July, CAD may grind higher in line with USD softness, but broader G10 underperformance remains a risk if global growth deteriorates.

The euro was June’s top G10 performer, climbing 3.3% and bringing its year-to-date gain to over 13%, supported by firm German data, easing ECB rhetoric, and optimism over Europe’s fiscal and defense spending. Even as eurozone growth softens, capital inflows and expectations for a cautious ECB pace of easing offer support. However, energy-driven inflation and global trade risks may limit upside. In July, the euro is positioned to extend gains moderately, though consolidation is likely after its sharp June rally.

Sterling extended its winning streak against the dollar for a fifth month, its longest since 2003,rising nearly 10% this year. Despite this strength, the UK economy is showing signs of fatigue, with falling payrolls, negative April GDP, and broadening sectoral weakness. The BoE's divided vote in June points to a likely rate cut in August. Energy prices have eased, but if labor data weakens further, the BoE may move faster than expected. For July, GBP may continue to track EUR/USD, though domestic fragility suggests limited upside and growing rate cut sensitivity.

The Japanese yen was the only G10 currency to weaken against the dollar in June, slipping 0.55%. While Japan's Q2 growth appears mildly positive, broader weakness persists, especially as auto sector tariffs loom. The BOJ is turning more cautious, with rate hike expectations receding and long-end bond pressures prompting issuance tweaks. USD/JPY remains rangebound, but narrowing yield differentials may eventually support the yen. For July, JPY holds a neutral-to-firm bias, with upside capped unless US rates fall or risk aversion resurfaces.

The Chinese yuan remained tightly controlled in June, with the onshore rate stuck in a narrow range. Minor gains against the dollar contrast with broader weakness versus G10 and EM currencies, reflecting the yuan’s USD peg. Slowing growth, weak real estate and infrastructure data, and lingering deflation reduce appetite for currency appreciation. Targeted stimulus continues, but stronger yuan moves are unlikely. In July, the yuan is expected to trade flat to mildly weaker, with a slowing economy and cautious policy stance capping upside.

The Indian rupee forecast has been nudged higher to 84.000 by Q1 2026, as solid fundamentals remain in place. India’s GDP outlook, moderating inflation, and strong monsoon conditions support inflows and consumption. A potential US-India trade deal could provide added clarity on tariffs and boost investment flows. However, global geopolitical risks linger. In July, INR may maintain a slight upward bias, supported by improving domestic fundamentals, though gains could be tempered by broader market volatility.

The Australian dollar touched a seven-month high above $0.6560 in June and is up 5.6% year-to-date. Still, risks are emerging. The RBA is among the most dovish in the G10, with markets pricing in up to three rate cuts this year. Meanwhile, falling iron ore prices and trade uncertainty, particularly ahead of the July 9 tariff expiry, pose downside threats. For July, AUD is cautiously constructive, with room for moderate strength if global growth and China demand hold up, but downside risks remain tied to commodities and tariffs.

The New Zealand dollar resumed its climb in late June after geopolitical disruptions briefly halted its rise. Strong Q1 GDP helped narrow the growth gap with the US, but ongoing tariff risks, trade exposure to China, and global uncertainty pose challenges. The RBNZ remains cautious, and the market prices in one or two more rate cuts. For July, NZD trades with a mixed tone, solid domestic support is offset by external risks, making it vulnerable to shifts in global trade sentiment.

The Mexican peso strengthened in June, dipping below the 19.000 mark for the first time since August 2023. Momentum came from easing trade tension hopes and broad USD weakness, though geopolitical volatility briefly disrupted the rally. A ceasefire and renewed Fed cut expectations helped the peso rebound. Banxico delivered another rate cut in June but flagged a more cautious approach ahead. For July, MXN maintains a moderately constructive outlook, but close US economic ties leave it exposed if a US slowdown materializes.